Philippines economy grows 5.5% in Q2

Among fastest in Asia

MANILA, Philippines — Faster farm output and strong consumer spending helped the Philippine economy expand by 5.5 percent in the second quarter, offsetting slower growth in the industrial sector and weaker public construction activity.

In a joint press conference yesterday, the Philippine Statistics Authority and the Department of Economy, Planning and Development (DEPDev) said the second quarter gross domestic product (GDP) growth was slightly faster than the 5.4-percent expansion in the first quarter. It was also the fastest print since the 6.5 percent in the same quarter a year ago.

The latest growth figure landed at the lower end of the government’s full-year target range of 5.5 to 6.5 percent, bringing the average for the first half to 5.4 percent.

Economic Planning Secretary Arsenio Balisacan said the second quarter performance keeps the Philippines among the fastest growing economies in emerging Asia, trailing Vietnam (eight percent), but ahead of China (5.2 percent), Indonesia (5.1 percent), Malaysia (4.3 percent) and Thailand (2.4 percent).

“The Philippine economy continues to show resilience and stability, even as global challenges persist and fuel uncertainty across many fronts,” Balisacan said. “Our continued economic expansion reflects not only the success of our policies, but also the resilience, creativity and determination of the Filipino people.”

National Statistician Claire Dennis Mapa said the main drivers of growth in the second quarter were wholesale and retail trade, repair of motor vehicles and motorcycles (5.1 percent), public administration and defense (12.8 percent) and financial and insurance activities (5.6 percent).

All major production sectors posted year-on-year gains, led by the seven-percent growth in agriculture, forestry and fishing. This is a turnaround from the 2.3-percent decline last year. Services also expanded by 6.9 percent, while industry slowed to 2.1 percent.

Agriculture growth was driven by a rebound in major crops: palay production jumped by 14.2 percent and corn by 29.8 percent. Balisacan attributed this to interventions like the Agri-Puhunan at Pantawid Program and investments in irrigation and cold storage.

The services sector remained a strong pillar of growth, with real estate activities accelerating to 6.1 percent and professional services expanding by 5.8 percent.

However, industry growth slowed as manufacturing output weakened, particularly for petroleum, chemicals and electronics. Public construction also fell by 8.2 percent due to the election ban.

On the demand side, household consumption grew by 5.5 percent. It marked the fastest pace since the first quarter of 2023, when private consumption expanded by 6.3 percent.

Government spending growth decelerated to 8.7 percent from 18.7 percent in the first quarter. Meanwhile, exports outpaced imports with 4.4 percent and 2.9 percent growth, respectively.

Gross national income, which includes net earnings from abroad, jumped by 8.2 percent, driven by a 32.8-percent rise in net primary income from the rest of the world.

Full-year target within reach

“We are expected to do better in the second half,” Balisacan said, citing easing inflation, stronger domestic consumption and the anticipated recovery in public construction following the election spending ban.

To hit the lower end (5.5 percent) of the 2025 growth target, the economy needs to expand by 5.6 percent in the second half, Balisacan said. For the upper end (6.5 percent), GDP must grow by at least 7.5 percent in the last two quarters.

“That’s high, but not impossible,” the DepDev chief said, adding that “if we see continuing improvement in consumer and investor confidence, plus better agricultural and manufacturing performance, we can still hit the upper end.”

Balisacan also pointed to stable weather forecasts, improved global trade outlook and continued rollout of government programs focused on education, health, food security and connectivity.

“The Philippine economy remains strong, steady and resilient. Still, economic growth must translate into genuine improvements in the lives of ordinary Filipinos,” Balisacan said. “To this end, the government is intensifying the rollout of programs and projects that bring quality public services closer to the people,” he added.

In a note, ANZ Research said the latest GDP growth remained relatively weak compared to an average pre-pandemic five-year growth rate of 6.6 percent. Private investment also remained constrained by low productivity growth and slowing global growth.

“Given the subdued outlook for external demand, private investment is unlikely to rebound in the near-term,” ANZ said. “Overall, we forecast growth to ease to 5.1 percent in 2025.”

ANZ also expects the Bangko Sentral ng Pilipinas to further cut policy rates this year as a more accommodative policy stance may be needed to support growth.

“We think the BSP will lower rates twice by 25 basis points each in the third quarter and the fourth quarter, bringing the terminal rate to 4.75 percent (from 5.25 percent currently),” it added.